How to build an emergency fund
16 May 2019
Did you know that, according to finder, 30% of Australians don’t have at least $1,000 saved for an emergency? In fact, 20% of Australians don’t have $500 set aside for one of life’s unpredictable moments.
Why do I need an emergency fund ?
Things like travel, a house, or a new car might seem like more exciting savings goals than cash for an emergency. No one likes to think about coughing up hundreds of bucks for a sudden car repair, or paying for expensive and unexpected dental work.
But for those reasons, you may find it helpful to have easy access to cash in your emergency fund to cover these expenses.
How much do I need to save in my emergency fund?
Generally, you should plan to save enough to cover a few months’ worth of expenses. That’s things like rent, energy bills, phone plans, food, and other living costs. Also consider any large costs that may come up, like car repairs or medical expenses.
How much you should set aside in your emergency fund will depend on your own circumstances. You should have enough to ensure that you can handle any expenses that could arise.
How to build an emergency fund?
Start putting what you can towards your emergency fund and, sooner or later, it will build over time. Even putting aside just $10 a week (or a couple of cups of coffee!) into your emergency fund will turn into $520 after a year, plus you may be able to earn interest on that amount depending on the terms & conditions of your bank account. But you should put aside an amount that you can afford.
Depending on your circumstances, a savings account could help separate your emergency funds from your everyday spending, while keeping the money reachable when you need it. The Suncorp Growth Saver Account pays bonus interest if you grow your net balance by $200 or more (excluding interest) and make no more than one withdrawal each month1. Even if you aren’t eligible for bonus interest in any given month, you may still be eligible to earn the standard interest rate. This option may suit your needs, because you will only be eligible to earn bonus interest if you don’t make more than one withdrawal per month, which may give you the motiviation to avoid digging into your emergency fund for non-emergency expenses.
If you aren’t able grow your net balance by $200 a month (excluding interest), that’s fine! You can still be eligible to earn interest on savings with no minimum balance or deposits with the the eOptions Savings Account and the Everyday Options sub-accounts.
Home loan customers could also choose to keep their emergency funds in an offset account, which may help reduce interest paid on their eligible home loan.
How to save for a rainy-day fund
Cut something from your spending
Perhaps it’s a gym membership building dust, or a daily café-lunch habit. Packing your lunch instead of buying it just one day a week could save you $10 a week, or $500 a year. Pick something you can live without and use those savings to build your rainy-day fund.
Take the thinking out of it
One way of helping to manage your budget is to split your cash across multiple sub-accounts of your Everyday Options transaction account. Alongside sub-accounts for things like savings and utilities, one could be dedicated to groceries. If you check your last few shopping receipts and figure out your average spend, you can make sure you keep that amount aside.
Shopping isn’t usually associated with saving. But when it’s shopping for the best deal on things like your energy, phone, and internet providers, you may end up saving rather than spending. Don’t hesitate to ask your current providers for a better deal or check what the competitors are offering. If you manage to find an internet provider (with as good as service) for just $10 less a month, that’s $120 a year back in your bank account to earn interest on!
Pay off debt
Credit card and personal loan fees and interest can add up when left unpaid. Before focusing on building an emergency fund, depending on your circumstances, you may be better off by focusing on reducing your debts. This may help you take steps to put additional savings towards your emergency fund!
Read your ways to riches
Got a pile of books bought ambitiously over summer that you haven’t touched? Try swapping out a month or two of paid television streaming and commit to reading instead (make sure you first check if there are any cancellation fees associated with cancelling your television streaming service!). Who knows – you might even find a book that’s such a page turner, you don’t need to re-subscribe to the streaming service at the end of the month! Or even better, sign up to your local library and get those reads for free!
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The information above is intended to be of a general nature only. We do not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.
1 Bonus interest is payable for every calendar month that you grow your balance by at least $200 and make no more than 1 withdawal. Interest accrued does not contribute to monthly account balance growth requirement for bonus interest. If bonus interest conditions are not met the standard variable rate only will apply.
Banking products are issued by Suncorp-Metway Limited ("Suncorp Bank") ABN 66 010 831722 AFSL No 229882. Please read the Product Information Document for Personal Deposit Accounts before opening an account. Fees, charges, terms and conditions apply and are available upon request. These links may take you to websites owned or operated by a third party. We do not sponsor, endorse or approve of any material on that website, and we make no warranty or representation about any information, products, services, offers or benefits through that website. Separate terms may apply on the third party website and you should read and accept these before proceeding.